Central Florida bankruptcies hit lowest mid-year mark since 2008

Personal-bankruptcy filings in Central Florida fell at a double-digit percentage pace during the first half of 2012, hitting their lowest mid-year mark since 2008, before the worst of the Great Recession had kicked in, according to the latest federal figures.

Fewer than 9,200 bankruptcy cases of all kinds were filed in the five-county Orlando area from January through June, down nearly 11 percent from the same period last year, according to data from the U.S. Bankruptcy Court for the Middle District of Florida. Nearly 95 percent of all bankruptcy cases involve personal insolvency.

It was Orlando's lowest six-month total since 5,701 cases were filed during the first half of 2008, as the recession was rippling through Florida's economy but long before the unemployment rate reached double digits in mid-2009.

Central Florida's latest figures continue a trend that began in 2011, when new bankruptcy cases fell for the first time in five years. Although financial insolvency remains historically high, experts have cautiously regarded the decline of bankruptcy filings as a promising sign for the region's economy.

"It is good news, for the most part," said Teresa Pulley Radwan, a bankruptcy law professor and associate dean at the Stetson University College of Law. "It indicates, hopefully, that there are fewer people out there who are in such dire straits they feel bankruptcy is their only option."

At the same time, she said, the decrease in bankruptcies since early 2011 has occurred, in part, because of the slowdown in home foreclosures, triggered by the 2010 "robo-signing" controversy and other legal problems.

"With much of that now worked out, you'll probably see banks foreclosing a little more quickly," Radwan said. "And you'd expect bankruptcies to eventually increase again in an effort to stave off foreclosure.

"These are all contradictory forces at work," she added. "To some extent, the economy is getting better, but there are many parts of the economy that simply haven't caught up to it."

Statewide, bankruptcy filings fell 14.2 percent to 42,263 cases during the first half of 2012; nationwide, the number of new cases decreased 13 percent to fewer than 632,000. In both case, they also were the lowest mid-year totals since 2008. The Sunshine State ranked 14th nationwide in per-capita bankruptcies, with 4.5 filings for every 1,000 adults, according to the American Bankruptcy Institute.

Some bankruptcy experts gave a surprising explanation for the trend: Election-year optimism. Despite the frequently negative tone of many political ads, a lot of people in serious financial trouble still hope that a solution is right around the corner.

"It just seems a presidential election raises hopes that somehow things are going to get better and the economy will ultimately rebound," said Walter Benenati, an Orlando bankruptcy lawyer. "So we always a see a decrease in filings during an election year."

But such hopes may dim, he added, as cash-strapped households encounter hazards such as stepped-up foreclosures, discontinued unemployment benefits or the expiration of federal foreclosure-relief legislation at the end of 2012.

"It is just too soon to say whether this trend of lower bankruptcies will continue into next year," Benenati said.